IUB Statement regarding Alliant/IPL Marshalltown Power Plant Decision

March 05, 2009
“The company has made a business decision based on its own interpretation of the current conditions facing the economy and the energy industry. The Board agrees that at this moment there are a lot of uncertainties with the economy and the potential for changes in regulation at all levels, which could have significant impact on such a project decision.

In determining the ratemaking principles for IPL’s proposed Marshalltown generating facility, the Board used the same methodology used by previous Boards in other litigated ratemaking principles cases to determine a reasonable range for the allowed rate of return on equity. The Board based its decision on the provisions of the Code of Iowa, the evidence presented in the record for this docket, and the precedents set by previous ratemaking principles decisions.

We recognize the 10.1% return allowed in this case is lower than the company’s request and lower than the rate approved in previous dockets. However, today’s investment climate is very different from the conditions that prevailed when those prior decisions were made, and the rate of return required to attract investment is also very different today.

The Board’s decision provided IPL with guaranteed cost recovery for building 350 megawatts of generating capacity at $2,816 per kilowatt. In making this decision, the Board accepted the company’s projections that it needed 350 megawatts of additional capacity to serve its customers and used what it felt were the most relevant cost estimates entered into evidence.”

Docket Order

On August 25, 2008, the Iowa Utilities Board (IUB) issued its written order in this case. Subject to certain conditions, the order grants Interstate Power and Light Company's (IPL) request for an electric generating certificate to construct and operate a 630-megawatt coal-fired power plant in Marshall County. This includes a requirement that IPL burn biomass fuels at the plant, as IPL says the plant is designed to do, and a requirement that IPL add new renewable energy sources (in addition to 200 megawatts of new wind resources already proposed) to its generation mix over the next 20 years. These requirements are intended to mitigate the company's future greenhouse gas emissions and the exposure of IPL and its customers to cost risks associated with those emissions. On April 30, 2008, the Board held public deliberations before voting 2-1 to grant this conditional approval for the plant.

Evidentiary Hearing

The evidentiary hearing in this docket was held Monday, January 14 through Friday, January 18, 2008 at the Whitehall Auditorium, Iowa Veteran's Home, Marshalltown. At the hearing, the parties of record presented their evidence and witnesses and cross-examined each other's witnesses.

The Iowa Code directs the Board to issue a certificate if it finds all of the following: (1) The facility is consistent with the policies of Iowa Code §476.53 (which is intended to encourage development of electric generating facilities) and economic development and will not be detrimental to providing reliable electric service; (2) the applicant is willing to abide by the terms of the certificate and the law; and (3) the facility is consistent with reasonable land use and environmental policies, considering the economics and other aspects of the available alternatives. On April 30, 2008, the Board held public deliberations before voting 2-1 to grant this conditional approval for the plant. The written order in this docket was issued on August 25, 2008.

Background Information

On July 2, 2007, Interstate Power and Light Company filed an application to build a coal-fired electric generating facility, with a maximum name plate capacity of 630 Megawatts, near Marshalltown, Iowa. A public informational meeting was held prior to the filing, as required by law, on May 21, 2007, in Marshalltown.

The Board sent copies of the filing to other state agencies that may be interested, such as the Iowa Department of Natural Resources (DNR). The Board issued an order docketing the matter for investigation and setting a procedural schedule including a hearing as described above. The DNR may appear at the Board hearing, but the more typical practice has been for the DNR to conduct its own review, separate from the Board proceedings, and then report the results to the Board. The DNR's analysis may not be complete when the Board issues its decision; any affirmative Board decision would be conditioned upon the applicant obtaining the necessary permits from DNR.